Energy providers increasingly asking for companies in debt to be shut down as energy bills crisis bites
New data from Mazars, the international audit, tax and advisory firm, shows that in the last four months, energy providers forced 20 businesses to close over unpaid energy bills – a 186% increase from seven in the equivalent period last year.
If an organisation is owed money by a business customer, they can use a “winding up petition” to close that business in order to gain repayment from that business’ liquidated assets.
Many businesses have seen their energy costs spiral over the past year as their fixed term contracts for energy ended and their suppliers have increased their monthly payments, often by large amounts.
Despite the support package recently announced by the Government, many businesses are still likely to see significant rises in their energy bills in the coming months, as the cap is double the average for business energy costs in October 2021.
Sectors particularly at risk of higher energy bills which increases the likelihood of insolvency include high users of energy such as chemical and food manufacturers, the hospitality sector as well as sectors such as residential care. Many small businesses who do not have the resources to secure more favourable deals are also likely to find themselves in difficulties.
Energy providers have traditionally been unwilling to forgive any debt owed from customers in arrears, as they find it relatively easy to replace customers who have gone insolvent. There is also a lower threshold for shutting down an indebted business compared to an indebted individual . The minimum debt threshold for registering an insolvency petition against a business is just £750, compared to £5,000 for individuals
Michael Pallott, Partner at Mazars says: “Small businesses – and even some larger ones – across the UK are heading for a tough winter. The rise in businesses closed down due to non-payment of energy bills shows just how badly many businesses are suffering already.”
“As the economy slows and many businesses still see their energy bills rise, we are likely to see many more closures in the months ahead.”